Engro Foods revealed that it is ready to launch pilot projects in the fresh milk and meat processing segments. On the other hand, the company has delayed the launch of its powdered milk till the next quarter of CY2013. PHOTO: FILE
KARACHI:
With problems in product distribution taking toll on its revenues, Engro Foods Ltd. – which has been struggling to fix its distribution infrastructure for the last few years – is reaching out to more distributors. The food giant, according to its chief has already put in a couple of new distributors.
A subsidiary of Engro Corp. – Pakistan’s largest private-sector conglomerate – Engro Foods has had difficulties with its product distribution. Its ice cream brand Omore isn’t available at many retail outlets. Dairy Omung, a new addition to the company’s UHT products range, is often not found at stores, according to consumers.
The company has been investing on the distribution side to fix the problems. Its distribution and marketing expenses for the half year ended June 30, 2013 were Rs2.6 billion. Despite an almost 10% year on year (YoY) increase in distribution and marketing expense, the company is struggling to fix the distribution network, which dented it revenues as reflected in the latest results.
The company reported net sales of Rs18.9 billion for the first six months of calendar year (CY) 2013 earlier this week, showing a decline of 4% when compared with Rs19.7 billion it earned in sales during the same period last year. The results were below market expectations, according to analysts that cover the stock.
The company’s revenues for the dairy sector declined by 4% YoY, following a 13% YoY decline in UHT milk volumes during the period under review, according to a report by AKD Research.
The company has cited problems with its product distribution network as the main reason for the decline in sales, JS Research said in its report.
“We have been trying to put in new distributors,” Engro Foods CEO, Sarfaraz A Rehman, told The Express Tribune. In fact, he said, the company has already signed up a couple of new distributors and is reaching out to more.
Admitting the distribution issues have caused problems, Rehman said a couple of distributors resigned because of the security situation in Karachi. Then there are issues with distribution infrastructure in general, he said. But there is no major problem and these things will be fixed soon, he said.
Responding to a question about Dairy Omung’s availability, he said Omung is a new business and it takes a long time before things start working smoothly.
During analysts briefing, Engro Foods revealed that it is ready to launch pilot projects in the fresh milk and meat processing segments. On the other hand, the company has delayed the launch of its powder milk till the next quarter of CY2013.
“Obviously, we should not launch any product unless we fix the distribution infrastructure,” Rehman said while responding to a question about the delay in the powder milk plant. Secondly, it’s difficult to launch a new product in down season, he added.
Following a result, which was below market expectations, the market analysts have revised their earnings projection for Engro Foods downward. AKD alone revised down the company’s earnings projection by 26% for CY2013.
Published in The Express Tribune, August 4th, 2013.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS (4)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
@ Haroon Rashid
That picture up there is not from ENGRO! Its just a file picture that ET has put up! That is not how ENGRO handles its milk
Interesting. So, marketing heads are spending a lot of money without paying heed to inefficient supply line. Well, advertisement business goes on even when there is no distributor / supplier hahahh. And I fail to understand, why do we praise Engro so much if it does not know how to manage a proper supply chain?
Ex-Engro comment are worth consideration "to get rid of the old school, ruthless and highly autocratic and centralised management style of its sales". Pakistan blessed with Organic Milk of buffalo which if processed will find a ready market. Thanks to the story of Mr. Farooq Baloch of the way raw milk is handled in the container with dents, with no cap, an aluminum metal container. If you look at the clothes with dust, or lime stone on the clothes from the milking sites. Please remember this is never ever acceptable to any consumer with the stuff called milk extracted manually with no idea of contamination of any external bacteria or stuff. The most lucrative market for milk and dairy products in the world which we can deal with under bilateral trade agreement of FTA/PTA treatment with China. Will the Chinese accept this milk under the conditions. Will Engro put a video of milk extraction/processing on UTube for the consumer, and the media, in Pakistan and China.
In order to fix distribution issues Engro for once need to get rid of the old school, ruthless and highly autocratic and centralized management style of its Sales Head who has been around since the company's inception. The system has become totally dependent on him and the moment he moves, things start collapsing. Do they intend to employ him forever?